Some Gold Minds Think The Metal Will Glitter Again Soon

August 17, 1985|By Dan Dorfman

NEW YORK — A new gold rush? You be the judge. In mid-June 1982, with gold selling at around $300 an ounce, investment adviser John Dessauer, who had been bearish on the metal for six months, suddenly reversed himself and strongly recommended its purchase. It was a super call -- gold rocketed to about $500 by February 1983. At that point, Dessauer reversed himself again -- another good call, with gold sliding to its current price of around $320.

Now he's changed his course again.

Dessauer is a former senior investment officer of Citibank's Zurich operations and the author of a 5-year-old, semimonthly investment newsletter, Dessauer's Journal, based in Orleans, Mass.

He thinks gold has the potential to show a huge rise to $500 to $600 an ounce by mid-1986. The price explosion, however, might not be immediate. ''The worst is over for gold, but the best could still be a few months away,'' he said.

Dessauer is one of several precious-metals experts who recently have turned more positive on the metal. The chief reasons:

-- A growing belief that rising inflation -- though not soaring inflation -- is just around the corner; that would erode the purchasing power of the dollar.

-- A further weakening of the dollar against other currencies, leading foreign investors to seek alternative investments; that would include gold.

-- Recent interest-rate declines that make it less costly to finance the purchase of gold, much of which is bought on credit.

If these experts are right, it would mark a major turn for gold, which except for periodic rallies has been an investment dog ever since it hit a record high of $870 an ounce on Jan. 18, 1980.

With inflation running at a paltry 3.7 percent, a gold boom stimulated by inflationary fears seems unlikely. But that's not the way some gold enthusiasts, including Dessauer, look at it.

He argues that a high-single-digit inflation rate is inescapable, given the dramatic change in monetary policy in the United States and abroad over the past 10 months. That change, coming from both the Federal Reserve Board and central banks around the world, is described by Dessauer as a shift from fighting inflation to fighting a possible recession. The new strategy has meant a big step-up in the money supply, and that, Dessauer said, invariably leads to higher inflation.

''I don't know when we'll get that higher inflation or how long it will last,'' he said, ''but when it happens, gold should run up quickly and dramatically.''

Though bullish on gold, Dessauer is extremely bearish on South African gold-mining stocks. He points out that Americans now hold about 30 percent of all South African gold shares; in contrast, they owned less than 25 percent before 1982. Because of growing anti-apartheid feelings, Dessauer said, ''we could see mass selling of these stocks, with Americans dropping their holdings to 25 percent or below.''

Peter Cavelti, the president of Guardian Trust International of Toronto, is one of Canada's leading precious-metals dealers and the manager of about $600 million of precious-metals portfolios. He is acknowledged as one of the best gold minds around.

''I'm positive on gold, but I'm not sure about the timing,'' he said.

Cavelti figures $450 is a good target price over the next 12 months, given the 20 percent to 30 percent rise in various currencies vs. the dollar over the past two months. Those foreign currency gains mean rising import prices, he said. In six to eight months, he added, those prices should be translated into a U.S. inflation rate of about 7 percent -- and thus a higher gold price.